Can Rupert Murdoch save online news?

It’s hardly a hot scoop that the newspaper industry is caught in a perfect storm of haemorrhaging ad revenues and dwindling readerships, exacerbated by a deep recession. Across the US, newspapers are failing and big-name titles teetering on the brink. The Los Angeles Times’s parent company, Tribune, filed for bankruptcy last December; in February, Hearst Corp warned it may close the San Francisco Chronicle, which lost more than $50 million in 2008, if it failed to slash costs or find a buyer; the same month, the owner of The Philadelphia Inquirer filed for bankruptcy protection, loaded with $390 million of debt. In the UK, the once-unassailable Daily Mail & General Trust reported a first-half pre-tax loss of £239 million, with operating profit for its national Associated Newspapers titles down 59 per cent, and by 85 per cent at its regional division, Northcliffe Media.

Newspapers are in deep trouble. If they survive, albeit in digital form only, then one event in May this year will surely be seen as a turning point in this narrative. It was late afternoon at News Corporation’s New York HQ, and reporters around the world had called in to hear Rupert Murdoch discuss a pretty dismal set of third-quarter results at a teleconference earnings call.

News Corp’s operating income had plunged by 47 per cent year on year from $1.4 billion to $755 million, with its newspapers hardest hit. Evaporating advertising meant that operating income in that segment – which includes The Wall Street Journal (WSJ) and the New York Post in the US and The Sun and The Times in the UK – were down from $209 million to just $7 million year on year. Strangely, given this flurry of bad results, Rupert Murdoch was in a surprisingly upbeat mood.

The usually gruff 78-year-old declared that “the worst is over”, before talking about “bright spots”, especially in the group’s “booming” movie business. But it was his calculated comments about failing newspapers which went on to spawn more than 7,000 headlines across the world – as well as blogosphere cacophony.

“That it’s possible to charge for content on the web is obvious from the [WSJ]’s experience,” he drawled. Visitor numbers at wsj.com doubled from 13.4 million in April 2008. “[We’re] now in the midst of an epochal debate over the value of content and it’s clear that, for many newspapers, the current model is malfunctioning.” Of News Corp, he said portentously: “You can confidently presume we are leading the way in finding a model that maximises revenues and returns for our shareholders.”

To this end, a team of News Corp execs has been convened to consider all possible digital business models. Murdoch added that “the very bright people we have at our SlingShot Laboratories” – an incubator launched in 2008 to develop new digital ventures – “are devising clever ways to monetise the content of some of our long established print properties”.

And if that weren’t enough to create a buzz, there was more to come. Just as three leading American newspapers – The New York Times, The Boston Globe and The Washington Post – agreed a deal to offer long-term subscribers a discount on Amazon’s Kindle DX, Murdoch hinted that he was planning to launch a News Corp branded rival to the Kindle.

“I can assure you we will not be feeding our content rights to the fine people who created the Kindle,” he informed his audience. “We will control the prices for our content and we will control the relationship with our customers.” Sounding every inch the Old Testament behemoth, he then pronounced: “The current days of the internet will soon be over.”

For Murdoch, it was a no-brainer. As print classified and display advertising revenues slumped by 21 per cent year on year at News Corp’s UK titles, by 16 per cent at its Australian newspapers, and by 33 per cent at the WSJ, wsj.com’s figures were soaring. According to data gathered by Omniture, wsj.com had an average of 6.8 million visitors in the first quarter of 2006 – up to 26.5 million visitors by this April.

Following a similar trajectory, wsj.com’s page views rose from an average of 109.6 million in the first quarter of 2006 to 224 million in April 2009. But for Murdoch and his lieutenants, including Robert Thomson, WSJ managing editor, the figures that really matter are paying subscribers. In the first quarter of 2006, 761,000 people subscribed to wsj.com. By the first quarter of 2009 this figure had risen to 1,067,000.

A subscription to europe.wsj.com costs $1.99 a week. An annual online-only sub typically costs £72, and a print-and online package is £163 a year. No wonder that Thomson has revealed plans for “a sophisticated micropayments service” for individual articles on wsj.com, which began charging in 1996, as well as “premium subscriptions” for access to niche fields such as energy, commodities and Dow Jones wire stories later in the year.

Meanwhile, Murdoch’s digital team will also have been crunching the numbers at rival ft.com, which first introduced a pay barrier in 2002. In 2007, the website switched to a “hybrid frequency access model” which allows the Financial Times to continue to charge “heavy users” of the website, while enabling “casual” visitors to surf for free. Currently, a visitor to the site can read three articles a month without registering, and up to ten after registration. If they want to read any more than that, they hit a paywall.

Across 2007, ft.com averaged 5.3 million monthly unique users and 43 million page views with “almost zero” registered users. A year later, that rose to an average of 7.1 million uniques, 72 million page views and 400,000 registered users. The latest figures are 11.4 million uniques, 82.2 million page views, with 1.3 million registered users.

In the past year, ft.com’s base of paying subscribers has grown eight per cent to 109,609. In 2007, the site had 101,000 subscribers and around 90,000 in 2006. The FT Group – which includes the FT, Interactive Data, The Economist, FTSE and Mergermarket – has a publishing business which is now two-thirds digital. Print- and advertising- based national media companies (including the Recoletos group in Spain, Les Échos in France and FTDeutschland in Germany) have been sold off, and digital businesses such as Mergermarket, Money- Media and Exec-Appointments acquired.

In 2008, digital services accounted for 67 per cent of FT Group revenues – a rise from 28 per cent in 2000. Significantly, print advertising accounted for 25 per cent of revenues in 2008 – a drop from 52 per cent in 2000. An FT spokesman told Wired that, like Dow Jones (publisher of wsj. com), ft.com is mulling the launch of a micropayments system.

“[It] is certainly something we’re looking at. We want to be as innovative and flexible as possible with how we monetise,” he said. “Every publisher should be looking at whether they can charge for their content online, and micropayments are one of the key ways they can do that.” None of this will have been lost on Rupert Murdoch, for whom the ft.com story is yet more evidence that the content free-for-all on the web needs to be shut down and, as print advertising and circulation nosedive, the business model is paywalls or bust.

Take the case of the stricken New York Times, which announced a loss for the first quarter of 2009 of $74.5 million, compared with a loss of $335,000 in the same quarter of 2008. But although profits and newsprint circulation were on the slide, it was faring far better on the net. In March 2009, according to Nielsen Online, nytimes.com had 20.1 million unique visitors, compared with 18.9 million a year earlier.

Chairman Arthur Sulzberger had already told shareholders that he was “exploring a new online financial strategy”. But a few days after Murdoch’s comments, a reporter on the paper, Jennifer 8 Lee, revealed in a series of tweets during a briefing by managers that a number of pay models were being considered urgently, including “metering” – charging readers after a certain word count or number of clicks – and a “tiered membership system”.

Comments

Great assembly of the issues but one element I'd like to read a lot more about in this debate is advertising.There are two ways to improve the revenue from content online. 1. the blunt and old-fashioned way of charging directly for access. 2. the more challenging and ultimately more desirable way of creating truly effective high value advertising which sustains the model. Far more demanding a task to take the alternative route and work with advertisers to truly monetise the audience. That is the real prize, not just closing off access -- charging a fiver and wondering where the readers have gone. Read The Times and thelondonpaper together sometime and you will start to see that charging isn't necessarily a defence of quality. One is converging towards the other...the wrong way.

Peter Bale

Jul 8th 2009

Really? That is what the smart people he has working for him have come up with.

How about a different direction? Yes charge people a subscription fee but make it truly useful. Let people be the editors of their own daily newsfeed tailored to their interests and downloadable for printing or onto an ereader or ipod type device as and when they want it.

Let the user decide what they want and where it coems from and act as a conduit for payments back to the content providers (professional and amateur) - so I want world, national and local news, Mark Steel from the Independent and Charlie Brooker from the Guardian, the crosswords from the Glasgow Herald and the Times, cartoons - Dilbert, Nemi and penny-arcade and sport missing out out cricket and rugby. Even let it graze and pay my favourite bloggers for their efforts. Hell - for the fun of it put the occasional lolcat in the comics page

Yes you could do all that with clever rss feeds but it would take time and too much effort for most.

If you want people to pay for it you're going to have to make it tailored and put them in control. A Last.fm for news. You never know if it is genuinely targeted and useful I might actually read the advertisements.